By Tiernan Ray

Shares of Apple (AAPL) made a substantial recovery this afternoon, rising from a low of $437.66, near their 52-week low of $435, to rise $7, or 1.6%, to close at $449.80.

Seabreeze Partners's Doug Kass notes in a missive this afternoon that his sources are muttering something about a stock-split being unveiled tomorrow at the company's annual shareholder meeting at its headquarters in Cupertino. However, Kass observes that Apple would have to get shareholder approval for anything beyond a two-for-one stock split.

There are, however, those that are urging a split as a better option than the “iPrefs” preferred shares that hedgie David Einhorn has been promoting of late. Oracle Investment Research's Laurence Isaac Balter, after reviewing retail versus institutional block trading, opines that creating what amounts to a retirement vehicle with preferred shares is a waste of time.

Instead, he suggests a 10-for-1 split as giving the shares a psychological lift among retail investors:

With all due respect to Mr. Einhorn, I do not see how bleeding Apple’s cash flow to support anyone but those domiciled in the Cayman Islands with a tax-free dividend into perpetuity (and a 10% tax equivalent yield). Income investors and retirees in the US don’t look to the technology sector for a secure retirement. You see, the real problem with Apple shares is that we in the business know the stock is super cheap based on any valuation metrics you like.But retail doesn’t understand [...] Reviewing our Money Flow charts, we see a fascinating phenomenon. Retail non-block money flow is accelerating at a rapid rate, yet institutional block purchases have increased or stayed steady. The problem is that the average American retail investor doesn’t buy P/E ratios. They buy (or sell) share price action. And in the past 6 months, non-block money flow selling has accelerated. That’s right; your neighbor gets scared when share prices fall (but you knew that already.)So I offer a solution that doesn’t cost a dime (well almost). A 10:1 stock split. Mathematically it does nothing except make for a low price. Valuation-wise it’s neutral. Financially, it saves the company from having to dole out billions it needs to fend off its competition from ever getting a stranglehold. More importantly however, psychologically it’s everything. The average retail shareholder will be attracted to a reachable and cheaper share price, as retail is not an insignificant owner [...] By enacting a perpetual preferred share, you hurt Apple in the bad years (which inevitably will happen). And then what do you have left? A hedge fund in the Cayman Islands collecting a 10% tax equivalent dividend forever, and US shareholders end up paying dearly for the privilege.

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FEBRUARY 26, 2013 4:08 P.M.

Rob wrote:

Hey Dog, here’s what I see. A CEO who is not tough, that needs to get tough soon. I have seen wasted money and time going into lawsuits and at court, and for what? Samsung paid no penality, and in fact, pumped out more phones and pads during the entire lawsuit joke. I see an Apple Marketing/PR/IR Teams getting their clocked cleaned by Samsung and Google. Have you seen those Samsung ad’s? Use to be Apple doing those ad’s. I have seen a Company and It’s Board sit on $137B of cash watching it do Squat! Might as well burn it. I see a company that turned it’s back on Shareholders during this 300 point drop and basically telling them to pound sand. I see a compamy that through it’s Arrogance and Old Apple Ways, lost their way and lost thousands of shareholders by doing so. I see a company that did not need to start a dividend, which I think is a waste, and they did so because they buckled under pressure by WallStreet to start one. Why? Who give a F about hedge funds and Wall Steeet. Jobs never did. I see a company that is taking shots, instead og giving them out, and continue to take shots. I see companies like Google, Priceline, Netflix, and Amazon soaring the last 6 months, while Apple can’t find it’s way. Google and Priceline almost 1000 dollars! Wow, you thing they give 2 F’s about giving dividends???
I have stated time and time again that Apple should not have and does not need to give a dividend. You want Apple buy it! You want dividends, buy Cisco, Intel or Microsoft and expect a dead stock forever. please, those companies haven’t moved a dime in 10 years! Apple will become vthem unless they get back to being Apple. Here’s what Apple should have done and still could do. it’s real simple. it’s called the 3 step!
Apple needs to split it’s stock 10 for 1. I have said that for 1 year, so today’s rumors make me laugh. Along with the split, Apple needs to do an immediate stock buyback of $50B. Do it now. Apple should stop the dividend and not do anymore! Lastly, Apple should buy a company that keeps them in the growth category and not this pathetic dividend killing end of company graveyard category. The companies are Twitter, Bidu, Netflix, or Priceline. You want growth and shareholder value. Apple would double post split in 2 months. That’s the old Apple. Anymore questions Dogman???

FEBRUARY 26, 2013 4:13 P.M.

Jeagan1999 wrote:

As an AAPL shareholder, I would welcome the 2 for 1 split and an increase in the quarterly dividend from $2.65 to $3.50-$3.75 range, more than the issuance of prefered shares.

FEBRUARY 26, 2013 4:24 P.M.

Jeff Blokker wrote:

I am sorry that Mr. Balter doesn't comprehend the purpose of Mr. Einhorn's proposal. No one seem to point out that in general the market values companies as growth stocks or dividend stocks but can't value a stock well when it is a mixture of the two. The issuance of iPref stock separates the the valuation into two distinct components so that they can be valued separately. Notice how AAPL tanked after they announced they would pay dividends. The valuation shifted from a growth stock to a dividend stock. So either they should increase the dividend payment or issue preferred stock. Issuing preferred stock is more financially efficient. A stock split will not have anything but a slight psychological effect. If we are only getting a stock split I think it is time to sell my AAPL because it demonstrates the weakness of their management.

FEBRUARY 26, 2013 4:25 P.M.

simyo wrote:

Would love a 10 for 1 split as it would allow many more people buy the stock. I have one friend who as an investor will invest blocks of 25K at a time but has to have at least 200 shares. He's lost over time but has sticked to his position. I'm sure there are lots of other investors who won't buy it at the current price. Seems like a win win. Other than that Tim Cook, John Ivy and team, will have some good things about the company to talk about tomorrow. They wont be doing it for the stock but rather for the company which will in the long run benefit all of its investors. Hope Rob will apologize when it does to Tim & Company

FEBRUARY 26, 2013 4:37 P.M.

Jwy wrote:

Tim Cook and his team simply can't continue to sit idle and do nothing. They need to unveil new marketing/sales strategy to counter Samsung. They should also invade online advertising territory to attack Google; they should make a move to split its stocks to issue iPrefs to stablize stock price, and of course they need to come up with new products. They just simply can't afford to do nothing like they did in the last 4 months.

FEBRUARY 26, 2013 4:38 P.M.

iJah420 wrote:

ROB!!!! You SIR! Are my clone. What you have suggested is my take VERBATIM! Over the past 3+ years.
What you say and iPray AAPL implements will put to rest such blatant stock manipulation. However, the market WILL find a way.... come hell or high weather to manipulate AAPL stock. I have @ least 20 + individual AAPL stock investors willing to buy in blocks of 100. 10:1 is IDEAL. You do the math. I also FEEL Apple NEEDS to put the hammer down once and for ALL!

FEBRUARY 26, 2013 4:42 P.M.

Dandy wrote:

The split will make the Stock far less volatile. The Short Selling Manipulation of the share price to make profits on the Options will be much more difficult. Now, the short sellers can create a drop of $4.00 or $5.00 almost at will. This makes for huge profits on 100 Share Options Contracts. If they got a 50 Cent drop for their efforts instead of $5.00 down, they will probably go find another yo-yo to play with. This would be terrific. If we had a split last October, we probably wouldn't have had such a huge drop!

FEBRUARY 26, 2013 5:13 P.M.

Russ wrote:

I'm confused: Why are some of the commenters here recommending a simultaneous, immediate stock split and buy back? The net result of those combined actions is simply to generate transaction costs, no?

FEBRUARY 26, 2013 5:26 P.M.

Market Mayhem wrote:

Look for crappy Apple to fall $14 tomorrow when it's announced there will be no stock split. This toxic stock is deader than Julius Caesar. I never would have believed a profitable company can't make any money for shareholders. What good is a two-for-one split for a company that has no future growth potential? How can companies like Intuitive Surgical, Netflix, LinkedIn, Priceline and Amazon shares keep rising to the sky while Apple's share price continues to drop like lead weight on Jupiter. All the reserve cash in the world and Apple can't get investors interested with any exciting acquisitions or new products. Steve Jobs must be looking down and wishing he'd spent more time with his family than working on Apple products as his company gets shellacked by the likes of copycat Samsung.

It's too bad Apple is unwilling to go up against Google and Samsung so Apple shareholders are going to get slaughtered as Google and Samsung shareholders laugh all the way to the bank.

FEBRUARY 26, 2013 7:01 P.M.

Anonymous wrote:

is part of Apple's Strategic Development roadmap to have a Rumors Department that just throws spurious bull***t into the wind to unsuspecting (and non research capable) journalists and investors?
To wit:
* a cheaper iphone
* supply chain increases/decreases
* channel checks on volumes sold and lenghts of lines on opening days
* Apple TV
* a smaller phone
* a larger iPad
* did I mention AppleTV ?
* dividend
* stock splits

FEBRUARY 26, 2013 7:12 P.M.

Larry wrote:

A split is just a silly short term stock manipulation. It changes nothing. I can't believe Balter actually thinks that's superior to any plan which increases the stock's actual yield.

FEBRUARY 26, 2013 7:24 P.M.

@anonymous wrote:

"is part of Apple’s Strategic Development roadmap to have a Rumors Department that just throws spurious bull***t into the wind to unsuspecting (and non research capable) journalists and investors?"

No, they can rely on analysts and fanbois websites for that.

FEBRUARY 26, 2013 8:11 P.M.

Philly Mike wrote:

I have to disagree with the Gentleman who stated, "Apple can not make money for shareholders", You must have gotten in at $700 not $325. If you are a long term investor, sit back and worry about your other positions, Apple will be fine. If you are a day trader, you can move in and out, grabbing money all day with this stock. It is a WIN WIN

FEBRUARY 26, 2013 9:31 P.M.

Chris Renaldi wrote:

HEY ROB

I SEE A TINY LITTLE BOY CRYING ALL THE WAY DOWN THE STREET

get a little less angry with your post and they might come across somewhat intelligent.

FEBRUARY 26, 2013 9:34 P.M.

chris wrote:

Market Mayhem

your perspective is crappy and pretty lost - sad really! suggestion - sell what ever you have invested in this crappy Apple and go away!

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.